AUS
NZ
UK
CA
USA
IND
The share price of South32 Ltd (ASX: S32) experienced a sharp decline on Monday morning, falling by 13.60% to AU$2.96 apiece. This downturn follows the release of the company's fourth quarter and full-year update, which provided insights into its recent production performance and future guidance.
Quarterly Production Performance
In the quarter ending June 30, South32 reported a 10% increase in copper production, reaching 15.3 kilotonnes (kt). For the full fiscal year 2024, the company achieved 98% of its copper equivalent production guidance, totaling 60.8 kt. Despite challenges, South32 remains on track to meet its operating unit cost guidance for copper operations.
Aluminium production remained steady year on year, with record production at the Hillside Aluminium operation, ongoing ramp-up at Brazil Aluminium, and continued recovery at Mozal Aluminium. Alumina production also remained same, with improved plant availability at Brazil Alumina which offset a temporary bauxite conveyor outage at Worsley Alumina.
Furthermore, Cannington's payable zinc equivalent production increased by 10% in FY 2024, driven by higher average metal grades despite adverse weather conditions.
Downgraded FY 2025 Guidance
The major factor contributing to the decline in South32’s share price was the downgrading of its FY 2025 guidance. The company reduced its production forecast for alumina by 5%, Sierra Gorda payable copper equivalent by 7%, and Cannington payable zinc equivalent by 9%.
Additionally, South32 announced significant pre-tax impairment expenses, including approximately US$554 million for Worsley Alumina and around US$264 million for Cerro Matoso. These expenses will be included in the FY 2024 results.
Financial and Operational Outlook
Despite the downgraded guidance and significant impairment expenses, South32's financial strategy includes completing the sale of Illawarra Metallurgical Coal later this quarter. This sale is expected to strengthen the company's balance sheet, simplify its business operations, reduce capital intensity, and unlock capital for investment in high-quality development projects, particularly in zinc and copper.
The construction and permitting processes at the Taylor zinc-lead-silver deposit at Hermosa are proceeding as planned. This project represents the first phase of a regional-scale opportunity to supply commodities critical for the global energy transition.
Recent Performance and Market Reaction
Over the past 12 months, the South32 share price has decreased by 16%, reflecting the market's response to the company's performance updates and future guidance. Investors remain cautious as they assess the impact of the revised production forecasts and significant impairment expenses on the company's overall financial health and growth prospects.
